New Jersey Bankruptcy Blog

New Jersey Lawyer Explains Bankruptcy Modifications After Filing

The chapter 7 process in New Jersey lasts about 4 months. After approximately 4 months, the debtor is completely out of the bankruptcy case with an order eliminating certain debt. No payments are required like a chapter 13 case. Typically, there is no need to make any changes in a chapter 7, other than correcting information or the bankruptcy schedules.
A chapter 13 is very flexible and may be modified for numerous reasons. A chapter 13 requires monthly payments to the trustee for 36 to 60 months. The number of months of the plan depends on numerous factors. The amount of the monthly payment depends on: the type of debt; the plan’s goal; the debtor’s disposable income; and the debtor’s assets. A plan may be modified by filing a modified plan with the court. The debtor is required to pay no less than the debtor’s disposable income. In limited circumstances, the monthly payment may be modified, if the debtor’s household income is reduced. At the filing of a modified plan, the trustee requires updated proof of income.
A list of possible chapter 13 plan modifications are listed below. A debtor may wish to modify their plan to surrender a house, or auto, and eliminate the mortgage or auto finance debt. A debtor may wish to purchase a car or house, during the plan. Someone could modify their plan to remove the mortgage payments arrears, after a loan modification is consummated. The plan could be modified to reject any type of lease, including a rental or auto lease. There are numerous reasons for modifying a bankruptcy plan in New Jersey.
Robert Manchel, may be contacted at (866) 503-5655, to discuss your New Jersey bankruptcy options.

New Jersey Attorney Details How Chapter 7 Impacts Rental-Investment Properties

Debtor owned rental and investment property is considered an asset and a source of income in a New Jersey bankruptcy case. As a result, I will explain how the courts and the bankruptcy code deal with both issues. I will first explain how the bankruptcy code analyses’ the asset valuation issue.
In a chapter 7, a trustee may sell any unexempt asset with a substantial value. Typically the debtor must provide the trustee with a valuation statement from a licensed New Jersey real estate professional, such as a sales representative, broker, or appraiser. One must determine the equity in the property, which is the retail value minus the mortgage payoff. Thereafter, the trustee will typically permit an additional deduction of 10% of the sale’s value.
Example: One individual who owns 100% of an investment property, files a chapter 7 bankruptcy case.
Property value is $150,000;
Minus the mortgage payoff of 90,000;
Minus $15,000, which is 10% of the cost of the sale of $150,000.
The result after the deductions Is $45,000.00.
Minus the bankruptcy code’s allowable exemptions of approximately $12,725 is $32,275.00. Please note that allowable exemptions vary based on the circumstances of each case.
Based on the above example, the New Jersey chapter 7 trustee will sell the real estate and make an immediate payment of $12,725.00 to the debtor, in the amount of his exemptions. The balance of the $32,275.00 will be distributed to the creditors in the order required under the bankruptcy code. The trustee and his attorney will also be paid from the sales’ proceeds. The debtor will be paid the balance, if any, after the above referenced distributions.
Please note that one should not rely on the figures of the above example, as the figures will change based on numerous facts and each individual’s circumstances. The exemptions that are applied to investment real estate is different than the exemptions that may be applied to your residence. Also, the analysis is different when a debtor owns the house with a spouse or other individual.
As explained in another part of this website, two criteria of a chapter 7 case relate to the household disposable income. Investment and rental property is a source of income that must be considered as additional household income. As a result, one must determine the monthly income that is derived from the property, which is the rent received minus all property expenses, including: mortgage; property taxes; insurance; maintenance; estimated income tax, etc. The income must be added to the other household income in connection with, both, the current monthly income (means test) analysis and the future income and expense analysis. In general, if either analysis results in disposable income, the debtor does not meet the chapter 7 criteria.
Robert Manchel, the New Jersey bankruptcy lawyer, may be contacted at (866) 503-5655, to discuss your options.

All of the debtor’s assets owned at the time of the chapter 7 bankruptcy filing in NJ are part of bankruptcy estate. However, the debtor is permitted to keep all of his bankruptcy estate assets that are exempt under the bankruptcy code. The details of exemptions and how they work are explained in a separate portion of my website.
There is a very limited list as to when a debtor’s right to an asset after the filing, is included in the bankruptcy estate. An inheritance is an asset of the bankruptcy estate, if the decedent passed away prior to the bankruptcy filing or within 180 days after the bankruptcy filing. The time in which the debtor receives the inheritance is irrelevant.
The following is an example as to how this works. Please note that this fact scenario is extremely unlikely. Five months after the bankruptcy filing, the debtor’s relative passes away and leaves him $100,000. The debtor does not receive the funds until 9 months after the decedent’s demise. After the trustee receives notice of the asset, he will likely file a Motion to Reopen the case. Thereafter, when the debtor receives the funds, the trustee will obtain control of the asset and make a distribution to the creditors.
If the person passes away, prior to the bankruptcy filing and the debtor has not yet received the inheritance, the entire inheritance is still part of the bankruptcy estate. If the debtor has a right to a substantial inheritance, prior to the filing, the debtor may not wish to file the chapter 7. Prior to the bankruptcy filing, in New Jersey, the debtor should consider the health of an individual who may leave them an inheritance.
Robert Manchel, who handles chapter 7 and chapter 13 cases in New Jersey, may be reached at 866 535 5655.

A chapter 7 case allows a person a fresh start in New Jersey. The bankruptcy court allows a debtor to keep certain property to commence their fresh start. However if the amount of an asset is substantial, the trustee may require the debtor to sell that specific asset. The only assets that are subject to scrutiny are the assets of the bankruptcy estate.
In general, the assets that are included in a New Jersey bankruptcy estate are all of the debtor’s assets in which he has an interest at the time of the bankruptcy filing. This includes any and all property- including any partial interests. This also includes a present right to an asset or money in the future. An example of a present right to future money is the right to sue someone from an automobile accident injury that occurred prior to the bankruptcy filing. If the accident occurred after the bankruptcy filing, the right to the money, would not be a part of the bankruptcy estate. In this circumstance, the bankruptcy courts look to the date of the accident.
However, the bankruptcy code sets forth a very limited list as when an asset becomes part of the bankruptcy estate, when the debtor’s right to that asset was initially received after the filing. The bankruptcy code’s list is as follows:
1. The debtor’s right to an inheritance that was derived within 180 days after the bankruptcy petition filing. This means that if the debtor has a right to receive an inheritance, from someone who passed away within 180 days after the filing, the inheritance is included in the bankruptcy estate.
2. The debtor’s right to an asset, that is related to the debtor and his (ex) spouse’s property settlement agreement and/or divorce court order, that commenced within 180 days after the bankruptcy petition filing. This means that if within 180 days after the filing, the debtor initially becomes entitled to an asset by way of a divorce or related court order, in connection with the debtor’s spouse or ex spouse, such interest is part of the bankruptcy estate.
3. Proceeds, product, offspring, rents or profits derived from the bankruptcy estate property, not including earnings from the debtor’s services after the filing. This is very atypical and generally applies to proceeds related to real estate in which the trustee has a right to take from the debtor. Again, this is extremely unusual.
4. An interest that the bankruptcy estate acquires. This is also very atypical and generally applies when the trustee purchases another asset with an estate asset that he has the right to take or control.
In the event that an asset is deemed a bankruptcy estate asset does not mean that the trustee can take any portion of the asset. All bankruptcy assets that are exempt may not be taken by the trustee. The explanation as to how exemptions work is located in another part of this site.
Robert Manchel is a bankruptcy lawyer in New Jersey, who may be contacted at 866 503 5655 to discuss your questions.